How Luxembourg is positioning itself to be the centre of space business

Posted on: 16 July 2019

By Louis Brennan, Professor of Business Studies, Trinity College Dublin. You can also listen to Professor Brennan contribute to a special podcast on the current space race and its wider implications here.

The Japanese Space Agency’s Hayabusa2 spacecraft recently landed on the asteroid Ryugu to collect samples for return to earth on July 13. Its predecessor Hayabusa successfully returned samples from the asteroid Itokawa in 2010.

Asteroid mining has become the focus of a number of countries and private companies. They are driven by the realisation that Earth’s resources are being depleted. Despite the costs and technical challenges involved, it is calculated that mining the many thousands of near-Earth asteroids can be made a practical reality, offering the prospect of rich returns. And one country you may not expect to be involved in this extra-terrestrial pursuit, let alone to become its hub, is Luxembourg.

It might be the EU’s smallest state, with a population of 600,000, but Luxembourg is wealthy. It has one of the highest GDP per capita in the world, far exceeding the other member states of the EU and almost triple the EU average.

Luxembourg managed to transform its economy in the latter decades of the 20th century from one that was heavily reliant on steel to being one of the major centres of European banking and finance. Today, with myriad disruptive forces circling its banking and finance sector, Luxembourg sees the business of space as one of its future engines of economic development and prosperity.

Building on its very successful experience since the 1980s of investing in near-space, orbital satellite networks, the government of Luxembourg has made great effort to establish the country as an attractive location for new space ventures. It launched a number of initiatives – encompassing regulation, tax, and research and development regimes – to create a vibrant ecosystem in Luxembourg for space companies extending from innovative satellite operators to those focused on extracting resources from asteroids.

Currently the space and satellite sector accounts for almost 2% of Luxembourg’s GDP, having grown from essentially nothing three decades ago. The country’s space sector now consists of more than 50 companies and two public research organisations that cover various segments of the industry. They are a direct result of Luxembourg promoting itself as a European hub for commercial space activity.

Business focus

In 2016, the government launched the Space Resources initiative with the goal of providing a unique legal, regulatory and business environment, enabling private investors and companies to explore and use space resources. More than US$200m was earmarked for investment in start-ups working toward space mining.

In 2017 it became the first European country and the second in the world after the US to adopt a legal framework that secures property rights for resources harvested in space. This allows commercial entities operating in Luxembourg to extract resources in space and own the legal rights to them.

Luxembourg has since expanded its focus to a broader range of space-related activities. The Luxembourg Space Agency was established in 2018 with a focus on developing business activities related to space and the creation of a multi-million dollar fund to invest in space technology start-ups. The agency aims to develop the Luxembourg space ecosystem further and link it with businesses outside the space sector to boost its contribution to Luxembourg’s economy.

In contrast to other national space agencies, it will not directly undertake research or conduct missions in space. Instead, the focus is on business development and the creation of economic value and jobs.

High risk, high return

It has not all been plain sailing. Multi-million dollar investments in US mining companies Deep Space Industries and Planetary Resources have not worked out. Both experienced financial challenges and were acquired by other companies, leaving the fate of their extra-terrestrial mining ambitions unclear and creating a significant investment loss for Luxembourg.

Both cases exemplify how space is a high risk business. Many start-ups in the industry are yet to develop viable business models so a lot of these investments are prospective. And the sector is clearly not without its risks for a country like Luxembourg, which is embracing it as an integral part of its strategy to maintain its future prosperity.

Still, Luxembourg has proven itself adept in the past at positioning itself to benefit from being at the centre of future growth industries. Given that capability and the future growth projections for the space sector, it would be unwise at this early stage to write off the prospects for Luxembourg’s adventure into space.

This article is republished from The Conversation under a Creative Commons license. Read the original article.